Industrials, financials pull stock market higher

NEW YORK 
The stock market extended its gains to a fourth day as the Federal Reserve said the economy was stabilizing.

The Standard & Poor's 500 index, which is the basis for many mutual funds, reached an 11-month high Wednesday as industrial stocks rallied. The Dow Jones industrial average rose 50 points to its second-highest close of the year.

The market stumbled briefly following the release of the Fed's report on regional economies, which also found that consumer spending would rise but only because of car purchases linked to the government's brief Cash for Clunkers program. The report also said the job market remains weak.

The prolonged slump in consumer spending has been one of the most serious points of worry for economists, and the Fed's warning about it deflated some of the market's optimism. About 70 percent of the U.S. economy depends on spending by consumers.

Matt Lloyd, chief investment strategist at Advisors Asset Management, said some investors are jittery because they are trying to determine whether they placed bets too soon on a rebound in the economy. The S&P 500 index has surged 52.8 percent in the six months since it hit a 12-year low in March.

"The equity markets rebound much quicker than the economy does," he said. "There's still a lot of apprehension."

The Dow rose 49.88, or 0.5 percent, to 9,547.22. The index has added 267 points, or 2.9 percent, in four days. It was the Dow's second-highest close of the year, just below its Aug. 27 finish of nearly 9,581.

The broader Standard & Poor's 500 index gained 7.98, or 0.8 percent, to 1,033.37, while the Nasdaq composite rose 22.62, or 1.1 percent, to 2,060.39. It was the highest close for the S&P 500 index and the Nasdaq since October.

Advancing stocks outpaced those that fell by about 5-to-2 on the New York Stock Exchange, where consolidated volume came to 5.3 billion shares compared with 5.4 billion Tuesday.

Jeff Kleintop, chief market strategist at LPL Financial Services, said a break in the rally could be good for the market to keep stocks from racing too high, too quickly.

"I think we're maybe due for a little bit of consolidation," he said.

Kleintop also contends that economic readings are carrying less sway in the market as more investors begin to expect an improvement in the economy.

"Economic data has lost a lot of its power to really move the market around. The consensus has now become we're in a recovery."

Industrial shares were the biggest gainers, as investors bet that higher commodity prices will translate to increased profits if the economy strengthens. The weaker dollar also makes the goods of U.S. exporters cheaper outside the U.S.

Caterpillar Inc. was the strongest advancer of the 30 stocks that make up the Dow industrials. Shares of the maker of construction and mining equipment rose $1.44, or 3.1 percent, to $48.41.

Light, sweet crude rose 20 cents to settle at $71.31 per barrel on the New York Mercantile Exchange. Gold fell but still hovered near $1,000 after crossing that mark Tuesday for the first time since February.

Bond prices mostly rose. The yield on the 10-year Treasury note was flat at 3.48 percent.

Haag Sherman, chief investment officer at Salient Partners in Houston, said investors' demand for stronger returns is weighing on the dollar, though he notes that the 10-year Treasury note has held its ground as some investors remain skeptical about a rebound in the economy.

"The 10-year really hasn't been punished as much lately. I think there is a tug-of-war between the equity and the bond market."